Project: WorldPort at DIA

1.0 Synopsis

With air cargo volume nearing handling capacity in 2000, Denver International Airport (DIA) contracted with WorldPort at DIA LLC to develop eight buildings totaling 495,200 square feet of office and cargo warehousing space to accommodate forecasted air cargo growth. The economic recession of 2000/2001 and the effects of September 11th significantly reduced demand at DIA and the expansion to date has been limited to 100,000 square feet. One building currently houses the US Transportation and Safety Administration and US Customs, two tenants who do not use the freight facilities. The second is currently vacant. No new jobs have been created as a result of the WorldPort at DIA investment. When the air cargo market rebounds, the facility can support up to 4,080 new jobs, based on the cargo handling capacity of the facility.

2.0 Background

2.1 Location & Transportation Connections

WorldPort DIA is located at Denver International Airport, south of the main passenger terminal and in proximity to the dedicated freight operations of DHL, UPS, and Fed Ex, and the passenger airline "Joint Use Facility". It is accessed directly from Pena Boulevard, which connects directly to I-70. I-70 is an east-west transportation corridor that runs from Utah to Maryland.

Denver International Airport is the twelfth busiest airport in the world based on passenger traffic. Union Pacific offers freight rail service north of downtown Denver, near Chaffee Park, north of I-70 and west of I-25

2.2 Community Character & Project Context

Metropolitan Denver is the primary hub of economic activity in Colorado and has diversified industries such as aerospace, aviation, bioscience, energy, financial services, and information technology. As the capital of Colorado, Denver has considerable employment in the government sector, with many state and federal agencies located in the City. Access to the mineral rich Rocky Mountains also has attracted mining and energy companies to the region. The area has attracted storage and distribution facilities servicing the Rocky Mountain region.

The City and County of Denver, which cover the same geographic area, had an estimated population of 593,000 in 2008, an increase of 8% since 2000. During the same period, the population of the state grew by 3.1%. Employment in the City and County of Denver grew by 1.1% between 2000 and 2008, to a total of 574,188 jobs in 2008. Employment in the state grew by 11.4% resulting in 3.2 million jobs over the same time period.

3.0 Project Description & Motives

In the latter part of the 20th century, most products shipped to and from metropolitan Denver were transported within and outside the state via truck. However, in 1999 and 2000, several high-tech and bio-tech firms within the Denver metropolitan area experienced rapid growth and increased their reliance on DIA for air shipments. A surge in purchases made through electronic retailing also contributed to the rising demand for air shipments. Growth in air shipments and insufficient capacity at DIA in the late 1990s led to plans to add capacity in anticipation of increased volume over the next ten years.

WorldPort, the project conceived to meet future demand, was designed as an intermodal facility to integrate ground and air transportation modes in the goods movement industry. WorldPort at DIA Owners LLC, a Delaware limited liability joint-venture company, was formed in 1998 for the purpose of developing air cargo, warehousing, office, and distributional facilities at DIA. The project was organized as a Public-Private Partnership (PPP) between the City of Denver, WorldPort at DIA Owners LLC, and Lehman Brothers.

The plan for the WorldPort air cargo facility called for the development of eight buildings with a total of 495,200 square feet by 2002, costing $100 million. DIA entered into a 30-year ground lease with WorldPort to design, construct, and operates the facility on 51 acres of land owned by the airport near the airport cargo operations. To date, two buildings have been developed on the site at a cost of $30 million ($2002). An estimated $200,000 per year is spent on operations and maintenance.

The City and County of Denver issued special facility bonds to help fund the project. These bonds are intended for privately-owned projects, yet are exempt from federal taxes, and lower capital to provide a development incentive. The bonds will be repaid by the private developer.

4.0 Project Impacts

4.1 Transportation Impacts

4.2 Demographic, Economic & Land Use Impacts

Prior to the opening of WorldPort DIA in 2003, the Denver economy contracted due to the decline of the dot.com industry. In addition, the events of September 11, 2001 drastically reduced commercial flights and passenger airlines began reducing aircraft belly size, thus reducing capacity for transporting cargo. These combined events decreased the volume of air cargo shipments in Denver, virtually erasing demand for the planned WorldPort buildings. Only two buildings (totaling 100,000 square feet) were completed in 2002. One building currently houses offices for the US Transportation Safety Administration and for US Customs. These operations relocated from elsewhere on the airport. The second building remains vacant. Air cargo volume in 2009 was 247,000 tons, approximately 48% of the volume in 2002 (519,000 tons). No new jobs have been created at WorldPort DIA to date.

Although the facility has yet to attract private tenants, the air cargo market will likely rebound in the future, and WorldPort will be in a position to support new growth by providing needed capacity. In 2000, air cargo volume at DIA reached maximum capacity, with 519,000 tons handled by the facility. . The additional capacity added at WorldPort DIA can handle an additional 136,000 tons of air cargo, supporting up to 4,080 jobs.

5.0 Non-Transportation Factors

When WorldPort was planned, air cargo shipments at DIA were dramatically increasing, with forecasts for continued growth. In the Denver metropolitan area, companies that specialized in hard drives, switch gears, computer chips, and bio-tech heavily used air shipments to transport their products. The rise in "Just-In Time" inventory practices and electronic commerce (retailing) created strong demand for fast service that heavily relied on air cargo. According to the FAA, air cargo traffic nationwide increased 6.7% annual from 1988 to 1998. Forecasts indicated a promising future for the cargo market. Boeing forecast that worldwide air cargo would increase at a rate of 6.4% from 1998 to 2007, while ACI forecast U.S. Cargo to increase at an annual rate of 5.8% from 1997 to 2010. WorldPort was built to accommodate expected future demand resulting from these predicted trends.

Due to the economic recession after the decline of the dot.com industry, coupled with the events of 9/11, many of the high-tech companies in Colorado were acquired, merged, or went out of business. Lagging sales led to a decrease in the willingness of customers to pay for expedited shipments, and many companies switched to two-day truck service, further exacerbating the drop in air cargo shipments. Volume in 2009 (224,423 tons) was significantly below the capacity of 655,000 tons. However, DIA is well positioned to accommodate additional air cargo when the economy begins to recover.

6.0 Resources

6.1 Citations

1. Muscatello, Dan, “The Economic and Financial Implications of Air Cargo.” August 2002.
2. Muscatello, Dan, “The World Port at Denver International Airport – Context for Physical Planning.” August, 2002.
3. Muscatello, Dan, “WorldPort at DIA. Infrastructure and Physical Characteristics.” October, 2002.
4. http://business.flydenver.com/info/research/aviation.asp
5. http://dola.colorado.gov/

6.2 Interviews

Organizations

Aurora Economic Development Council

Denver International Airport

Jacobs Consultancy

Landrum and Brown

Footnotes

Case study developed by Economic Development Research Group